The following report in the case against Mortenson for allegedly fabricating stories told in his best-selling books, Three Cups of Tea and Stones Into Schools, was released on April 30, 2012

This morning, U.S. District Judge Sam Haddon threw out a civil lawsuit filed against Greg Mortenson, David Oliver Relin, and the Central Asia Institute by a group of four plaintiffs who claimed that alleged fabrications in Mortenson’s two books, Three Cups of Tea and Stones Into Schools, amounted to a clear pattern of fraud, conspiracy, and racketeering.

In an order dismissing the suit with prejudice, Haddon chided the plaintiffs for presenting arguments that he called imprecise, flimsy, and speculative. Mortenson’s case has been pending for almost a year and will now be closed to further appeal. The lawsuit was filed in the wake of reports on 60 Minutes and by writer Jon Krakauer that Mortenson had fabricated events—sold to the public as nonfiction—in two best-selling books about his experiences building schools in Central Asia.

Below is the full text of Haddon’s ruling:

IN THE UNITED STATES DlSTRICT COURTFOR THE DISTRICT OF MONTANAMISSOULA DIVISION

Plaintiffs in this case allege themselves to be consumers who purchased either Three Cups of Tea, a book coauthored by Defendants Greg Mortenson ("Mortenson") and David Oliver Relin ("Relin"), or Stones Into Schools, a book authored by Mortenson (collectively, "the Books"). Penguin Group, Inc. ("Penguin") published the Books. Plaintiffs claim they were harmed by Defendants when they purchased the Books under the belief they were "nonfiction," although the books were, allegedly, filled with fabrications.

Pending before the Court are Defendants' motions to dismiss Plaintiffs' Fourth Amended Complaint for failure to state a ,9claim upon which relief may be granted, under Federal Rules of Civil Procedure 12(b)(6). All are opposed.

BACKGROUND

In 1993, Mortenson visited mountains near K-2 in Pakistan. Some years later, he and Relin coauthored Three Cups of Tea as an account of Mortenson's humanitarian efforts in Pakistan. Penguin published the book in 2006. A follow-up book, Stones Into Schools, written by Mortenson, was published by Penguin in 2009. Penguin marketed both books as "nonfiction." Central Asia Institute ("CAl"), a nonprofit Delaware corporation, headquartered in Montana, allegedly expended significant sums o f money to finance the writing, publishing and sales of the Books. Plaintiffs claim that Mortenson transferred funds from the book sales to MC Consulting, Inc. ("MC"), a Montana corporation asserted to be owned and controlled by Mortenson.

Plaintiffs contend they purchased one or more of the Books for approximately $15 each. They claim that the Books should not be categorized as nonfiction, as a number of misstatements relating to their contents have surfaced, and that Mortenson, Relin, MC, CAl, and Penguin entered into a fraudulent scheme to falsely portray Mortenson as a hero in order to boost book sales.

PLEADING AND PROCEDURAL HISTORY

On May 5, 2011, a class action complaint alleging fraud, deceit, breach of contract, RICO violations, and unjust enrichment was brought against Mortenson and CAI. An amended complaint was filed six days later, which added Penguin as a Defendant and Dan Donovan as a Plaintiff. Negligent misrepresentation claims were also added. The alleged RICO violations were removed.s Plaintiffs amended the complaint again on June 17, 20II, removing Jean Price as a Plaintiff, removing CAl as a Defendant, and adding Relin as a Defendant. Plaintiffs' Third Amended Complaint, filed July 27, 2011, asserted breach of contract, breach of implied contract, fraud, deceit, unjust enrichment, negligent misrepresentations by Penguin and Relin, liability by Penguin as principal, punitive damages, unjust enrichment by MC Consulting, for an accounting, for injunctive relief, and class action allegations. In early August 20II, Mortenson, MC, Penguin, and Relin filed motions to dismiss. Plaintiffs responded on August 31, 20II. On January12, 2012, the Court allowed Plaintiffs to file the current pleading, a Fourth Amended Complaint.1 This pleading, inter alia, reinstated the claimed RICO violations and again named CAl as a Defendant. Motions to dismiss were renewed.

No class certification motion under Rule 23(c)(1 )(A) has been filed. In the absence of such motion and in the interests ofjudicial economy, the Court has detennined it appropriate to address and resolve the pending motions to dismiss.

Hearing on the motions was held on April 18, 2012. The matter is ripe for decision.

Fed. R. Civ. P. 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to give a defendant a faif notice of what the claim is and the grounds upon which it is based. "All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party" in assessing a motion to dismiss for failure to state a claim under Rule 12(b)(6). Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. ] 996).

A two-step analytical process for determining the sufficiency of pleadings under Rule 8 was established by the United States Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). In step one, the court determines which allegations are merely "labels and conclusions," "formulaic recitations," or "naked assertion[s]." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555, 557). The reviewing court need not accept the truth of such allegations. Id. Step two requires the court to determine whether the remaining allegations, which the court must accept as true, "plausibly give rise to an entitlement to relief." Iqbal, 550 U.S. at 679. The reviewing court, in determining plausibility, is required to engage in a context-specific task drawing on the court's "judicial experience and common sense." Iqbal, 550 U.S. at 679. Satisfaction of this pleading requirement does not oblige the pleader to show probability of entitlement to relief, just plausibility.

Rule 9(b) requires a party alleging fraud to "state with particularity the circumstances constituting fraud or mistake, [while] [m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Iqbal acknowledged that Rule 9(b) allows "a person's mind to be alleged generally," but does "not require courts to credit a complaint's conclusory statements without reference to its factual context." Iqbal, 556 U.S. at 686. "Rule 9 ... excuses a party from pleading discriminatory intent under an elevated pleading standard," but does not enable evasion of"the less rigid ... strictures ofRule 8." Iqbal, 556 U.S. at 686-87.

Plaintiffs' RICO claims attempt to establish, in a general fashion, the time, place, manner of each predicate act, the nature of the scheme involved, and the role of each defendant in the scheme. The primary racketeering activity alleged is the Defendants' "ongoing scheme to deiraud and actually defrauding purchasers of the books over at least an eight year period and continuing to this day, where they continued to misrepresent that the contents of [the Books] were true, nonfiction accounts ofwhat really happened, when, in fact, the contents were false and the accounts did not happen." Essentially, Plaintiffs contend that Defendants knew the truth, but portrayed Mortenson into a hero in ordcr to persuade people to buy the Books, which financially benefitted the Defendants.

Plaintiffs begin their factual accusations by listing several alleged fabrications within the Books, which the enterprise wrote. Plaintiffs next describe numerous lies said to have taken place after the Books were written. Examples include CAl purchasing many of the Books from outlets, the enterprise using "fraudulent speaking engagements," paying Mortenson's expenses, and advertising and promoting the Books. Many ofthese purported lies do not actually appear to be untruthful or illegal, and are overly vague.

The Complaint rests on two primary arguments: (1) the enterprise advertised and promoted the books; and (2) the enterprise caused Mortenson to make several public statements regarding good works he performed which were purely fabricated. Plaintiffs also allege, "[o]n information and belief, [that] Mortenson ... transferred funds from his book sales to MC and otherwise involved MC in the marketing and sale ofthe books."

The Complaint states, in support of causation, that the individual Plaintiffs purchased the Books because it was "represented to [them] as true." The RICO claims assert: "There is no question but that Plaintiffs did rely on such fraud and misrepresentations o f the enterprise so as to show causation for their individual damages, but there is no requirement to show that every victim to the enterprise's mail fraud and wire fraud relied upon the fraud in order to recover."

Plaintiffs assert they suffered concrete financial loss when they paid full price for a nonfiction book when it was fiction. The financial loss is alleged to be "the out-of-pocket loss, ... minus the value ofthe false and fraudulent "nonfiction" books, which is [characterized as] zero."

The RICO claims are fraught with shortcomings, including failure to satisfy causal elements, failure to specify the roles o f the Defendants, not adequately pleading enterprise theories, and failure to specify an actionable, identifiable racketeering activity. Failure to adequately address the causal elements is the ultimate and fatal flaw. The Complaint does not state, nor is it possible to ascertain, whether Plaintiffs would have purchased the Books if: (I) the Books were labeled or marketed as fiction; or (2) the readers knew portions of the Books, asclaimed,werefabricated. Plaintiffs'overlybroadstatementsthattheypaid approximately $15 for the Books because they were represented as true does not suffice. Additionally, Plaintiffs fail to allege when they purchased the Books, which is crucial in analyzing this case. In fact, Plaintiffs never allege they visited CArs website or saw or heard any statements made by it before purchasing the Books.

The Complaint likewise does not differentiate allegations against each Defendant, nor does it inform Defendants separately o f the allegations surrounding any alleged participation in the fraud. General statements that the enterprise caused Mortenson to make various false statements relating to his life experiences do not satisfy Twombly and Iqbal standards. Pleaded examples of how the enterprise marketed and promoted the Books also fail to satisfy appropriate pleading standards. Members ofthe enterprise cannot be expected to defend against Plaintiffs' claims, when each participant's role is only vaguely described, if at all. Furthermore, it is not clear what role Relin played in this matter, aside from coauthoring Three Cups of Tea, as all references to him are lumped together with Mortenson and Penguin, and any alleged wrongdoings attributed to him are clearly "labels and conclusions" or "naked assertions."

The Complaint's conclusory allegations referencing the legal clements ofa RICO enterprise fail. The "enterprise" element is not met. See U.S. v. Turkette, 452 U.S. 576, 583 (1981). Moreover, no RICO claim through an "associate-in­ fact enterprise" theory, is pleaded. Evidence supporting such a theory is missing from the Complaint.

As noted, the primary wrongdoing claimed is that Detendants allegedly knew ofthe Books' falsehoods and decided to write, promote, and sell them under the guise ofnonfiction. Those conciusory statements as to the Defendants' alleged intentional wrongdoings are included without reference to their factual context, much like the plaintiff in Iqbal. With the exception of Mortenson, upon whose life experiences the Books are based, this Court cannot give credit to such unsupported accusations. The Complaint does not satisfy RICO elements. The RICO claims are not plausible and fail.

B. Counts V and VI - Fraud and Deceit

A common law fraud pleading must allege nine elements: "(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) the hearer's reliance upon its truth; (8) the right o f the hearer to rely upon it; and (9) the hearer's consequent and proximate injury or damage" caused by their reliance on the representation. May v. ERA Landmark Real Estate of Bozeman, 15 P.3d 1179, 1182 (Mont. 2000). The heightened pleading standard of Rule 9(b) must be met. See Bly-Magee v. California. 236 F.3d 1014, 1018 (9th Cir. 2001); Iiraunhofer v. Price, 594 P.2d 324, 328 (Mont. 1979).

Under Montana law, deceit may be proven if "[0]ne ... willfully deceives another with [the] intent to induce that person to alter the person's position to [his] injury or risk." Mont. Code Ann. § 27-1-712. Deceit can be either: (a) suggesting a falsity as a fact "by one who does not believe it to be true;" (b) asserting "as a fact (something] which is not true by one who has no reasonable ground for believing it to be true;" (c) suppressing "a fact by one who is bound to disclose it or who gives information of other facts that are likely to mislead for want of communication ofthat fact; or (d) a promise made without any intention of performing it. Id. Additionally, "[0)ne who practices ... deceit with intent to defraud the public or a particular class of persons is considered to have intended to defraud every individual in that class who is actually misled by the deceit. Id. Deceit is essentially grounded in fraud, therefore, Rule 9(b)'s heightened pleading standard applies. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-05 (9th Cir.2003).

The fraud and deceit claims incorporate allegations from the RICO claims. Formulaic recitations ofelements offraud and deceit are added.

Plaintiffs assert that the fraud and deceit claims meet Rule 9(b)'s specificity requirements. Not so. The fraud pleadings in point of fact are weakened by incorporation ofthe flawed RICO allegations. Moreover, the Complaint fails to specify what representation the Plaintiffs relied upon or the materiality ofthat representation. Plaintiffs are not entitled to rely on general allegations of purported lies within the Books' content. At a minimum, Plaintiffs must show that they relied on some particular statement by the Defendants made outside the text of the Books. A formulaic statement of the elements of fraud in this instance is insufficient. Here, important, and indeed, necessary, facts supporting the elements aremlssmg. The fraud claim (CountV) as pleaded is not plausible and must be dismissed. The same conclusion applies to the deceit claim (Count VI), which likewise lacks factual support allowing it to continue.

Assertion of a claim for breach of contract requires privity of contract between plaintiff and defendant. State ex reL Buttrey Foods, Inc. v. Dist. Court of Third Judicial Dist., 420 P.2d 845, 847 (Mont. 1966). The Court has not found and the parties have not referenced controlling authority or persuasive case law in the Ninth Circuit directed to privity ofcontract between an author or publisher ofa book and a reader who purchased such book. The Second Circuit's principle that a news publisher is not in privity with the publication's purchasers, absent "fraud amounting to deceit, libel, or slander" is, however, persuasive. First Equity Corp. of Fla. v. Standard & Poor's Corp., 869 F.2d 175, 179 (2d CiL 1989); See also Jaillet v. Cashman, 115 Misc. 383,384 (N.Y. Sup. Ct. 1921).

The Ninth Circuit has cited First Equity in holding that a book publisher owed no duty to a car dealership owner for allegedly publishing errors concerning emission systems in automobiles. Sinai v. Mitchell Books, 996 F.2d 1227 (9th Cir. 1993). Incidentally, Lacoff v. Buena Vista Pub.. Inc., 183 Misc. 2d 600, 611 (N.Y. Sup. Ct. 2000) cited Sinai in supporting that publishers have no duty to investigate the accuracy of its books. Lacoff dismissed a consumer action against a publisher and arranger of a "how to" book for alleged false claims within the books. While contract claims were not discussed in detail in those cases, they nevertheless serve as a starting point for analyzing privity as it relates to contract formation and contract law.

Plaintiffs' contract claim asserts that: (1) "Mortenson, Relin, and Penguin offered ... the Plaintiffs and the class" (2) "nonfiction and true stories of Mortenson's activities," (3) "Plaintiffs ... paid for, and received, the ... books," (4) but many "representations made in the books were false, misleading, deceptive, and contrary to the agreement.,,27 Plaintiffs and the class are said to have suffered damages as a result.

The Complaint contains no allegations that the parties entered an express contract with terms expressed in "words." An express contract is not well- pleaded. Iqbal, 556 U.S. at 686-87; Twombly, 550 U.S. at 555-56.

Plaintiffs' alternative breach of implied contract claim states that, "[b]y writing, publishing, advertising, marketing, and promoting [the Books] as nonfiction and true stories, the charaeteristics of said books became an implied contractual condition of sale upon the purchase thereof by the Plaintiffs and the class."28 Defendants respond to the contract claims with the argument that the Complaint does not allege Plaintiffs communicated with any Defendant, and therefore, consent is not found, and there is no privity of contract, which Montana requires in contract claims. See Buttrey Foods, Inc., 420 P.2d at 847 (complaint alleging breach of a lease agreement alone, without establishing the requisite privity of contract between the parties, fails to state a claim).

The Court cannot accept as true, and as a matter of sufficiency of pleading, Plaintiffs' conclusory statement that H[b]y writing, publishing, advertising, marketing, and promoting (the Books] as nonfiction and true stories, the characteristics o f said books became an implied contractual condition o f sale." More is necessary if an implied contract is to be found.

The Complaint, arguably, may be said to adequately plead two of the four elements necessary in a breach of implied contract claim. The implied contract claim could be said to plead a lawful object (a book sale), and identifiable parties capable of contracting (Plaintiffs as purchasers, and Relin, Mortenson, and Penguin as authors and publisher). However, consent and consideration are not shown.

Plaintiffs claim to have paid $15 consideration to receive the Books. Whether Penguin, Mortenson, Relin or someone else received Plaintiffs' money is not asserted. Penguin, as publisher, arguably may have received a portion of the money, but the Complaint does not indicate whether Relin or Mortenson received any part of the consideration. Although further investigation might reveal a contract between Penguin and the authors entitling Relin and Mortenson to some share ofthe profits, the Complaint does not so allege.

Even if consideration were not at issue, consent has not been shown. Plaintiffs fail to establish whether Mortenson, or Relin, or Penguin offered the Books for sale, instead naming all three as having offered the Books for sale to purchasers as nonfiction pieces of literature.

The Montana Supreme Court has determined that ifan implied contract is to said to exist, the four elements ofa contract must still be present and some form of communication and relationship must exist between the parties. See CB&F Development Corp. v. Culbertson State Bank, 844 P.2d 85 (Mont. 1992); Lythgoe v. First Sec. Bank ofHelena, 720 P.2d 1184 (Mont. 1986); In re Marriage ofRock, 850 P.2d 296 (Mont. 1993); McNulty v. Bewley Corp., 596 P.2d 474 (Mont. ]979); St. James Cmty. Hosp. v. Dept. of Social and Rehabilitation Services, 595 P .2d 379 (Mont. 1979). Such is not the case here.

The conclusion reached in Jaillet and First Equity that no privity exists between a publisher or author, and a purchasing reader is sound. Plaintiffs here failed to cite any law supporting that a contract existed between the parties and, while the conduct ofthe parties may be considered in assessing whether an implied contract existed, the abstract facts pleaded here do not rise to that level. Neither the contract claim nor the implied contract claim survives. Both must be dismissed.

D. Remaining Claims

"[U]njust enrichment is an equitable means of preventing one party from benefitting from his ... wrongful acts." Hinebauch v. McRae, 264 P.3d 1098, 1103-04 (Mont. 2011)(citing Estate of Pruvn v. Axmen Propane, Inc., 223 P.3d 845 (Mont. 2009)(citations omitted). Even "in the absence of a contract between parties, [unjust enrichment] may create an implied contract in law." Id. To prevail on a claim for unjust enrichment, a "plaintiffmust show some element of misconduct or fault on the part of the defendant, or that the defendant somehow took advantage of the plaintiff." Randolph V. Peterson, Inc. v. J.R. Simplot Co., 778 P.2d 879, 883 (Mont. 1989)(citing Brown v. Thornton, 432 P.2d 386, 390 (Mont. 1967». As previously discussed, Plaintiffs have failed to sufficiently allege reliance, cognizable injury, and misconduct against the Defendants. The Unjust Enrichment claims (Counts VII and X) are dismissed.

An injunction "is appropriate [only] when a party demonstrates' (1) that it has suffered an irreparable injury; (2) that remedies available at law ... are inadequate ... ; (3) that, considering the balance ofhardships between the [parties], a remedy in equity is warranted; and (4) that the public interest would not be disservcd by a permanent injunction.'" Northern Cheyenne Tribe v. Norton, 503 F.3d 836, 843 (9th Cir. 2007)(citing eBay Inc. V. MercExchal1Z'h L.L.C., 547 U.S. 388, 391 (2006). Plaintiffs fail to allege an "irreparable injury" or that remedies at law are inadequate, as evidenced by Plaintiffs' specifIc damage request'(the price of the books)31 Plaintiffs also fail to demonstrate that, in considering the hardship between the parties, a remedy in equity is warranted. The Injunction claim (Count XI) fails and is dismissed.

An accounting must show that there is some relationship between the parties requiring an accounting, and that the plaintiff is entitled to a balance that can only be ascertained by such relief. Teselle v. McLoughlin, 173 CaL App. 4th 156, 179­ 80 (2009). Plaintiffs fail to show, or even allege, such a relationship exists. Furthermore, they specifically allege the right to recovcr a certain sum or a sum that can be made certain by calculation. For these rcasons, the Accounting claim (Count XI) fails and is dismissed.

In short, the Complaint fails and is deficient on several fronts. The RICO, fraud, and deceit claims are not pled with the requisite level of particularity. Plaintiffs fail to satisfy causal elements of RICO, do not identify each Defendant's role in the frauds, present highly questionable enterprise theories, do not adequately identify the alleged racketeering activity, and fail to identify the specific representations and materiality ofsuch representations relied upon. An express contract is not pleaded. An implied contract is not found, as consent and consideration are missing. In the absence 0 radequate allegations of reliance, cognizable injury, and misconduct against the Defendants, the remaining claims fail.

The case has been pending for almost a year. The Complaint before the Court is the fifth pleading filed. PlaintitIs have been accorded every opportunity to adequately plead a case, if one exists. Moreover, the imprecise, in part flimsy, and speculative nature of the claims and theories advanced underscore the necessary conclusion that further amendment would be futile. This case will be dismissed with prejudice.

ORDER

1. Defendants' Motions to Dismiss are GRANTED.2. The Complaint" is DISMISSED WITH PREJUDICE.3. All other pending motions are DENIED as moot. DATED this 30th day of April 2012.